January 18, 2016

Signs The Market Is Heading Back Toward Earth

The Orange County Register reports from California. “Back from the depths of the housing crash, Orange County is once again the mortgage mecca of America New quarterly federal jobs data show the county is the national employment leader in two key home-loan related categories. A big lure to the mortgage game are paychecks far bigger than Orange County’s average weekly wages of $1,057 for all workers. Orange County’s weekly pay for real estate credit workers was $2,087 in the second quarter. That’s 17 percent more than the $1,781 the same workers made nationwide. Local loan brokers averaged $2,093 a week in the second quarter – 13 percent more than peers nationwide.”

“Even with Orange County’s recent mortgage hiring spree, these two home-loan industries now employ roughly half the number of workers who made mortgages at the peak of housing stupidity. That doesn’t mean there’s no reason for caution. Will higher mortgage rates and/or an erratic economy kill housing’s recovery, making today’s lending decisions look silly?”

The Star Telegram in Texas. “The boom is over. So says Jim Gaines, chief economist at the Texas A&M Real Estate Center, referring to the strong job growth and sizzling home prices that have buttressed the North Texas economy over the last few years. Gaines told us that 2016 will be ‘our transition year in Texas,’ marked by significantly slower growth in the economy and jobs that will put the brakes on soaring home prices. He foresees growth in statewide gross domestic product of less than 1 percent, while home price gains could halve.”

“‘The feeling of a boom economy is going to leave,’ he said. ‘The question is not whether we’re going to slow down and possibly decline, but at what rate and what’s the timing.’”

The Advertiser in Louisiana. “In 2015, Acadiana’s oil and gas workers might’ve drawn sympathy from their neighbors. This year, we might all feel sorry for ourselves. The oil and gas industry, beset by an international oil glut and price war, lost thousands of jobs last year, more than 2,000 in Acadiana alone. More losses are expected. Housing is down. So is hospitality. Transportation, too. ‘The ripple effects are greater than a year ago,’ said Cary Heath, an economist at the University of Louisiana at Lafayette, referring to the effects of the declining overall economy as ‘collateral damage.’”

The New York Times. “New York City real estate continues to sell for astronomical prices, but there are signs the market is heading back toward earth. Bidding wars, brokers say, are less frequent. Few open houses have lines out the door. And asking prices, while still lofty, are increasingly moving down, especially for luxury properties.”

“Among the discounted listings circulated by brokers and publicists in recent weeks: ‘$7 Million Price Drop!!’ for a five-bedroom at 110 Central Park South, listed for $17.995 million; ‘1 Million PRICE REDUCTION!’ for a three-bedroom penthouse at 15 West 20th Street, listed for $7 million; ‘HOT DEAL. *$150K Price DROP*’ for a one-bedroom at 280 Park Avenue South asking nearly $1.4 million; ‘PRICE REDUCED’ by $14 million in November, and further reduced by a total $18.5 million, for a historic townhouse at 684 Park Avenue, listed for $29.5 million. And the list goes on.”

“‘I have seen more broker incentives and price reductions in the last few months than I’ve seen in the last three years combined,’ said Leonard Steinberg, the president of the real estate brokerage firm Compass. ‘The market got carried away with itself in the first half of 2015. Some people went in with crazy pricing expectations.’”

The Miami Herald in Florida. “BankUnited has stopped offering retail residential mortgage loans to consumers and laid off some of its workers. South Florida’s largest locally based bank said new residential mortgages weren’t generating enough business but current mortgage holders won’t be left in the lurch. South Florida banking consultant Ken Thomas said he was ’shocked’ by the news. ‘One of the biggest needs we have in this community is affordable housing, and when you have the biggest South Florida-based bank backing off residential mortgage lending that raises eyebrows,’ he said. ‘If a small bank did this, that’s one thing. But this is BankUnited.’”

“The bank received a $4.9 billion federal government bailout after failing in 2009 because of bad mortgage loans it made during the real estate boom. (Only IndyMac Bank’s $11 billion failure was more costly for the government during the last downturn.) ‘This is not a great result for taxpayers, especially in one of the most economically lopsided communities in the nation,’ Thomas said.”

“One industry source familiar with the bank said BankUnited had bet big on expanding its residential lending business last year but couldn’t generate enough volume because of compliance costs and slowing Latin American investment in Miami. ‘They’re not the only bank that is considering this,’ said the source, who asked not to be named. ‘This could be the first of many.’”

Bits Bucket for January 18, 2016

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